Laurie Doering
Lawyer, Mishcon Purpose
Hello, good afternoon to everybody who’s joining us and welcome to this Climate litigation lunchbreak. I’m Laurie Doering and I’m a lawyer here at Mishcon Purpose. A quick word about us, we’re a business division within the law firm Mishcon de Reya dedicated to advising clients about ESG matters and bringing strategic litigation cases before the Courts including cases related to climate change and in that capacity it’s a huge honour for us to welcome Eline Zeilmaker Smidt who is a Senior Legal Counsel at Milieudefensie, also known as Friends of the Earth Netherlands who of course as everybody on this call will know, is the lead claimant in the landmark climate case against Shell brought in the Dutch Courts. Hello Eline, it’s wonderful to have you with us today. Before handing over to Eline I am just going to provide a very short recap of the basics of this case to date and then Eline and I will discuss the case and specifically the appeal judgment that just came out.
So in 2019 Milieudefensie issued a claim in the District Court in The Hague against Royal Dutch Shell as it then was which the top holding company of the Shell Group, the oil major which was then registered in The Hague. It has of course since moved its HQ to London for reasons that we can all just speculate about. Milieudefensie was the lead claimant amongst six other NGO’s and around 17,000 Dutch residents who were litigants in their individual capacity and had appointed Milieudefensie as their legal representative. In 2021 the District Court gave its judgment and it was an earthquake in the legal work. It was the first time that private entity, a corporate had been ordered to reduce its global GHG – Greenhouse gas emissions in line with the Paris agreement. Specifically Shell was ordered to reduce its group-wide emissions by 45% by 2030. Shell appealed the judgment and last month on the 12 November the Dutch Court of Appeal gave its judgment in the appeal. It was a two phase judgment and rather difficult to interpret which is why we are grateful to have Eline with us. On the one hand the Court re-affirmed Shell’s basic duty to prevent dangerous climate change. On the other hand the Court quashed the specific order against Shell to reduce its emissions. So that by way of recap, Eline if I can just ask you what, what you make of specifically the findings against Shell in the Appeal judgment that upheld the duty in line with Dutch law?
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Yeah thank you very much Laurie. First of all thanks for having me here I am really excited to be here and thanks also for your excellent recap of the 2021 judgment of the District Court of The Hague and as you said, it’s completely right, it has to phases but bottom line I think we are very, very happy with this, with this ruling as well because the ruling still means that Shell and other major companies are certainly not able to sit back quietly after this ruling. As some legal experts has put it very beautiful, they already said that it’s a pyrrhic victory for Shell and another expert spoke about Easter eggs in the ruling and these Easter Eggs are certainly there because of course the Court did not impose a concrete reduction obligation on Shell but they upheld several very important rulings and added new ones as well and to mention a few of these Easter Eggs; one of them, well most important one is of course that human rights offer protection against dangerous climate change and that companies have a legal obligation to protect human rights. They have a duty of care to reduce the scope 1, 2 and 3 emissions and especially the scope 3 emissions are important because scope 3 emissions mean that they have influence and control over consumer emissions, scope 3 are the consumer emissions and Shell has a duty to reduce them and another very important topic is the role of public legislation. The Court ruled the public legislation like the ETS system and CSDDD are not exhaustive they do not indemnify. So based on the duty of care and Tort law a Civil Court can impose further reaching obligations on companies and another high thing to highlight is one, a very beautiful Easter egg in the ruling is that the investments in new oil and gas fields may be at odds with the responsibility to contribute to the Paris agreement and I think that yeah, that something, the climate litigation in other cases can really build upon further. Another last Easter egg and a lot of them, there are more; I can really recommend you to read the ruling yourself but a last one I want to mention is that Courts are allowed to rule on the means that are needed for companies to comply to their duty of care. So first of all companies have a legal obligation to protect human rights. Companies have a duty of care to reduce their scope 1, 2 and 3 emissions and Courts are allowed to rule on the means of such a, a duty of care and of this contribution. So that’s what we believe that a door is wide open for future litigation and that’s also what we do at Milieudefensie, we will continue our client case against the ING Bank and in this case we challenge new oil and gas fields, the investments in new oil and gas projects and also we ask for a 48% emission reduction as the buyer minimum. So I hope that answers your question.
Laurie Doering
Lawyer, Mishcon Purpose
Thank you so much Eline, that’s certainly a lot of Easter eggs to get into although we’re just about opening our first windows on the advent calendar so thank you for all of those. I want to ask you about the first one you mentioned which was the duty of care.
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Mm.
Laurie Doering
Lawyer, Mishcon Purpose
Which of course is a Dutch law concept but the reason the Court, both at the District Court stage and then affirmed at the Court of Appeal stage, reached that conclusion was based on International Human Rights law so I wondered if you could reflect on the relevance of that finding for businesses that are not registered in the Netherlands?
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Yeah of course, I, I, what I really do believe is that what you see in this case is that soft law has become hard law. The Court uses soft law protocols and guidelines like the OECD guidelines like the UNGP and also the Net Zero, how do you say it, the 1.5 business playbook, all these kind of soft law protocols and guidelines were used by the Court to interpret a duty of care and I really believe that other Courts are able to build further upon our ruling. I hope, does it answer your question?
Laurie Doering
Lawyer, Mishcon Purpose
Absolutely, thank you and I highly recommend as Eline did as well that members of the audience read the judgment it is incredibly accessible and was issued in English as well as Dutch on the day of, of the ruling which is an incredibly impressive display of judicial efficiency and the judgment goes in… analyses very clearly how International Human Rights law translates into obligations for private entities as Eline has just, just reminded us and there is certainly relevance under other legal systems as well of that analysis. Now one other Easter egg that you mentioned of course was the, the finding that new production, exploration and production investments that, that Shell are still undertaking and Shell is not the only oil and gas major that is still investing in oil and new exploration and production. In fact, I believe all oil and gas majors are still investing in new fields with the possible exception of BP as far as I am aware and of course that finding that new fields may be at odds with the Paris agreement, that finding is a very important one isn’t it? However, at the same time the Court of Appeal found that Shell’s plans to reduce its emissions in its own scopes 1 and 2, which mean the emissions in its own operations, its own control are actually already in line with the Paris agreement and that was the reason why the Court found no order was necessary for those areas. Now my question to you Eline is, how can you reconcile the Court finding on the one hand that Shell’s investment in new oil and gas fields may be at odds with the Paris agreement with the finding on the other hand that actually Shell has credible plans to reduce its emissions that own its own control?
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Yeah that’s a very important, a very good question and I think it’s important to notice that scope 3 emissions, to the consumer emissions make up 95% of the total amount of Shell’s emissions. Now Shell has said that they will reduce the emissions of their own operations and the energy supply related to these operations but to put it simple, what Shell says is well we put up solar panel or windmill next to our operation so our operations will become net zero in 2050 and we will reduce the emissions of our own operations. But the whole problem with this approach is that scope 3 is still there because they will simply, the operations will be still running, they will drill, the drilling will go on and the only way to stop that is to stop new oil and gas projects. That alone will directly reduce scope 3 emissions and therefore the ruling is incredibly helpful and important because that’s exactly what a Court ruled, they ruled that oil and gas expansion might be at odds with the duty of care and the Paris agreement and it’s also very helpful I believe that the Court also recognised that the possibility that if Shell restricts its oil and gas production the gap will not be completely filled by other companies.
Laurie Doering
Lawyer, Mishcon Purpose
Thank you Eline that’s a perfect segway to my next question. So focussing on scope 3 emissions then which is as you reminded us, the biggest, the biggest part of the pie, the Court did hold, as you said, that Shell has influence over those emissions, those are the emissions caused by burning the gas and the oil that Shell sells so it’s the downstream emissions caused by consumers and the Court very importantly held that Shell is responsible for the consequence of the product it sells. However, the Court refused to order Shell to reduce those emissions for two reasons really in, in essence and one of those reasons was the difficulty in quantifying Shell’s, Shell’s reduction pathway as part of the global collective effort to combat climate change and here the Court said there was a lack of expert consensus in what an individual company like Shell should do and the second, the second reason of course was that even if the Court ordered Shell to reduce its scope 3 emissions such an order might be ineffective because other suppliers would make up the difference. So that has been called the substitution argument or also the drug dealer defence. So I’d like to ask you one question about each of those. First of all looking at the expert consensus point. Now I’d like to ask you first to, to clarify why Milieudefensie asked for 45% as the reduction goal for Shell because I think that doesn’t come out very clearly in the judgment why the global goal, the global average was simply translated to Shell and then secondly, I’d ask, I’d like to ask you about is consensus really the correct standard of proof that the Court should expect in this, in this issue?
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Yeah well first of all the global pathway approach of the 45% reduction obligation we really elaborated a lot on this topic and we, it’s based on the doctrine of hazardous negligence in Dutch Tort law and also human rights law and the precautionary principle and last but not least the CBDR principle and we also believed that the 45% reduction obligation is also supported by climate protocols and guidelines, the UNH race to zero is a net zero guideline 1.5 business playbook. UNH like OECD and UNGP and it’s, it’s a lot and if you are really interested I can really recommend you to read our pleading note 4 but bottom line is that we believe it’s important to, to stay away from the narrative that is created by the fossil fuel industry that it is difficult to find a concrete reduction percentage because Shell and the fossil fuel industry are the biggest contributors to dangerous climate change in the world and oil and gas forms two thirds of the fossil fuels. So it’s either comply or explain to the global reduction pathway of 45% Shell is, err, the emissions of Shell are nine times the emissions of the Netherlands so why not is a better question maybe and we really believe we also file expert reports of highly qualified experts, really not the least among others the IPCC lead author, Yuri Rogelia and he really proved that 45% emission reduction obligation is certainly not over asked for a major company like Shell and yeah, it, it might have been possible, of course we don’t know what, what went on in the Court room behind the door, the closed doors but it might be possible the Court has tried to find expert consensus on the concrete reduction percentage just like in the Urgenda case. The Urgenda was a case against the State and in that case the Court has found that there was an expert consensus on the band width of 25-40% reduction for States and the Court took a minimum and in this case, as already said, we filed expert reports of Yuri Rogelia and other experts and Shell has file expert reports of an expert of the Sustainable Gas Institute that was paid by Shell and he came up with reduction pathways of 2% and 7% emission reductions for Shell in 2030 and yeah, we believe this raises good questions, as already said, the fossil fuel industry is the biggest contributor to the planet crisis and yeah, a 2% emission reduction is completely incredible for a giant like this and the pathways it also shows that the pathways that Shell took into account are certainly not in line with important legal principles and that is also an approach we have taken in, in appeal. The pathways are not in line with the generational equity principle, the precautionary principle and the fair share principle. So in the end we are hopeful because in this case the Court did not establish, uh, impose a specific reduction obligation on Shell but as already said, they did rule that they are allowed to do it so that they didn’t do now doesn’t mean they won’t do it in another case or in the end. We are running a marathon not a sprint, that’s what our Directors say and therefore we don’t back away but we’ll, we’ll try to find and I am really sure that maybe in this case if we appeal, we are not sure about that yet and otherwise in another case we’ll find ways to convince the Court.
Laurie Doering
Lawyer, Mishcon Purpose
Thank you Eline. So the 40, just if I can just break that down, the 45% reduction that you were asking for was really a minimum bar, a minimum floor for Shell in the same way that the Dutch Supreme Court ordered the Dutch State in the Urgenda case to reduce its emissions by 25% by 2020 and that was seen to be the minimum that it should be doing. So in other words you, you were trying to set the, set the bar low to avoid an argument over the specific amount that Shell should be reducing which arguably should be much higher than 45% and those 45% they were taken from the IPCC report which is the global reduction average needed by 2030.
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Well it’s not completely like that but our first approach was indeed you are right, it’s a global approach we had said that Shell has to yeah, adjust, has to set the target in line with the global reduction target of 45% and we tried to convince the Judge that that is not over asked and we also filed expert reports that show that sectoral pathways, so not global pathways but pathways that are specifically for the oil and gas sector also if, if you take into account things like uh, not too much CDR, air carbon dioxide removal techniques that are yeah unproven and they are high risk, connected to that if you take that into account and the intergenerational equity principle, the precautionary principle, if you take these principles into account then a sector approach will also lead to 45% reduction obligation is not over asked that supports our statement on that and unfortunately Shell was able to, yeah the Judge did not follow us in this, this fact.
Laurie Doering
Lawyer, Mishcon Purpose
Thank you Eline. I am conscious of time so I am going to move on to the next question, the next aspect of Shell’s defence in which it’s succeeded which was the argument that an order against Shell to reduce its scope 3 emissions would be ineffective. So this has been called the drug dealer defence because other suppliers would simply step in and, and, and make up the difference by supply the gas and oil that Shell has reduced in its sales. Can I ask you Eline what, what was Milieudefensie’s argument in response to that?
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Well first of all we have argued in appeal that the substitution argument, that is the drugs dealer defence argument is irrelevant because in Tort law it is only relevant to assess if Shell is breaching its own duty of care and a Court also has rules that we are talking here about Shell’s own responsibility, they have a responsibility of their own to reduce their emissions and what other companies do doesn’t matter. So that was the first line of argument and what you see is that they did follow that in respect to establishing the duty of care and responsibility for scopes 1, 2 and 3 but they did not follow us in this respect in the substitution, related to the substitution argument but next to that we also filed expert reports that have showed that the reduction obligation on Shell will have direct and indirect effects. One of these reports is of the excellent Fergus Green from LSE and Pete Ericson and they really show that if you, if Shell will reduce its emissions and reduce its production then this will have price effects leading to a decrease in consumer emissions so there is an effect, you cannot say it’s not effective. And of course we also filed expert reports of highly qualified scientists to prove the third substitution, what we are talking about here for both production and for selling does not exist and here you see that the Court recognises the possibility that if Shell restricts its oil and gas production then the gap will not be completely filled by other companies. But unfortunately the Court didn’t argue the same way for trading and that’s a different aspect so the production, they, they believe that it is not completely possible to fill the gap by other companies but if they reduce their trading activities it’s not proven yet according to the Court.
Laurie Doering
Lawyer, Mishcon Purpose
So I am sure there’s a lot of economic debate on that point but from a legal perspective I was quite surprised to see the Court finding in favour of the drug dealer defence because from a public policy perspective that’s quite a dangerous precedent to set indeed in circumstances where the, the Court also affirms an individual duty on Shell to reduce or to do its part in climate change mitigation and the parallel with common law jurisdictions such as England in, in our jurisdiction there is clear authority that if there are multiple wrong doers contributing to the same damage, each of them will be individually responsible. There’s, there’s authority going back to the 19th Century from river pollution where there, if you have multiple factories along the same river, they are all contributing to the pollution and you find, you bring a claim against one of those factories in public nuisance, the Court is authorised to find that individual factory or, or their operator liable regardless of the fact that others are still contributing to the same problem which I think is an important principle of the rule of law. Eline I wonder if you could just in the remaining time, give us the basics of what, what’s next from Milieudefensie and this case? Thank you.
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Yeah well of course we are considering appeal if we will file an appeal or not but at the Supreme Court because that’s the next step. It’s not yet decided yet. In principle in the Netherlands the party that has lost the appeal has the right to appeal at the Supreme Court so in this case, Shell doesn’t have the same rights as we do at this moment. And we consider everything but this is a very complex case and cassation that’s what such an appeal is called is also very complex. So this consideration takes time but well, keep your eyes open and you can for sure, if we file a cassation you will hear it.
Laurie Doering
Lawyer, Mishcon Purpose
Well I think there, there’s lots of scope for that, I know you can’t say, you can’t say that yourself but I can, I think that a lot of people who would be very interested in, in seeing the Dutch Supreme Court give its view on this case bearing in mind that is the same Court that ordered the Dutch State to reduce its emissions in the original milestone case in Urgenda. And I believe you’ve got three months to make your decision and file your appeal, is that right?
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
That’s completely correct, yes. The 12th February everything should be clear.
Laurie Doering
Lawyer, Mishcon Purpose
Okay, will everybody please diarise that now and check back in on the 12th Feb. Thank you so much Eline, for taking the time to talk to us today and, and best wishes to you and Milieudefensie.
Eline Zeilmaker Smidt
Senior Lead Counsel, Milieudefensie
Thank you very much Laurie, it was really a pleasure to be here. Thank you.
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